An IPO is a very exciting investment for both resident Indians and non-resident Indians. The public market issues the shares of companies in the IPOs for the first time; hence, it allows the investors to have a share in the ownership of the business. Making any investment in an IPO in India is very simple, whether it is being done by a resident or an NRI.
Let's move on to this blog to discuss how you can apply for an IPO in India-similarly, for Indian residents and Non-Resident Indians.
How to Apply to an IPO
The application to an IPO is no different for Indian and NRI citizens, even though the rules and regulations are different on eligibility. Let's take a close look at how you can apply to an IPO.
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Steps to Apply to an IPO
Before you file an IPO, you will have to open a demat and trading account. These accounts are required by an investor in order to hold as well as trade in shares. You can open these accounts with any SEBI-registered broker or financial house. Many banks have an integrated demat and trading account too. You can also explore to open an account with Chola Securities.
At the minimum, NRIs will be required to have an NRI Demat account and an NRI trading account. Apart from this, they will also need to open a NRE or NRO bank account for processing the IPO application.
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Choose an IPO
After opening your demat and trading account, you are prepared to submit an IPO application. But before you start your application, it's important to shortlist the IPO with proper research. You can conduct research by reading about the company's IPO on DRHP, as well as reading the research analyst's perspective on various news websites, including our own news section. It's crucial to monitor the stock markets to stay informed about all upcoming IPOs, either by following the news or using our IPO calendar.
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Registration through UPI for Retail Investors
It allows retail investors applying through brokers to make payment through USI (Unified Payments Interface). Once you have placed your bid through the platform of your broker, you will receive a mandate in regards to the amount through UPI. Approve the mandate, and that amount in your account will get blocked till the shares are allotted.
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ASBA (Application Supported by Blocked Amount)
ASBA is one of the most prominent applications through which an IPO is raised in India. ASBA blocks funds from the bank account without debiting. In this way, the funds will be available during the time of allotment yet don't get deducted unless you are allotted some shares.
Here's how to apply through ASBA:
- Log in to your bank's net banking portal: Banks have the facility for IPO under the tab "Investments" or under "ASBA services".
- Select the IPO: Select the specific IPO in which you wish to apply for.
- Fill your information :Fill in your Demat account number, Bid quantity and the price.
- Submission: After conducting the verification, you then submit your application in which the bank will freeze the required sum on your account.
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Allotment and Refund Process: Once the subscribed issue period gets over, the company will allote the subscribed shares on demand generated basis. After allotment of such shares, they will get credited into the demat account and meanwhile the blocked amount will be debited from the concerned bank account. If shares are not alloted then your money gets released.
Refund or allotment among NRIs is done similarly, but the amount will be credited or refunded to their NRE or NRO account as per their application.
Important Things to Note for NRIs
- Investment Limitation: NRIs can apply only in the Non-Repatriation and Repatriation categories. The funds that have been applied from an NRE account will be repatriable whereas the funds drawn from an NRO account cannot be sent abroad.
- Tax Consequences: The NRIs would be taxed at the same rate for capital gains as that of a resident. Income through an NRE account is tax-free within India, but income of a previous year from an NRO account is taxable.
The above step makes it very easy for Indians and NRIs to apply for an IPO in India. Using the above steps, you may avail yourself of all the interesting offers coming through the Indian IPO market. Before applying for an IPO, get ready with your Demat and trading accounts so you can easily use ASBA or UPI while applying. Research well before investing in an IPO to avoid wrong decisions.
In the case of Indian markets, this opportunity for wealth creation through investments in IPO is available to any Indian resident or NRI.